marketing article analysis

E.D. SMITH AND SONS LIMITED

Lee Ann Gentry of E.D. Smith and Sons Limited reviewed the history of the firm’s line of

jam products. As Product Manager, she determined the company marketing plan for the product

line. The 135 year old company based in Winona, Ontario would have to respond to the declining

consumption of jam and jelly, and trade rumours that retail store shelf space for all jam, jelly, and

marmalade products was about to decrease. Three years ago, advertising support for the product

line was cut. As she gazed at the lush agricultural lands of the Niagara Escarpment on a warm June

day, the plan of action for the remainder of 2019 was far from certain.

Company Background

In 1882, Ernest D’Israeli Smith was a fruit farmer in the fertile Niagara Escarpment area of

Ontario known as Winona. Growing raspberries, black currants, grapes, apples and cherries, E.D.

Smith was dissatisfied with shippers taking part of the grower’s profit. His solution was to ship his

own fruit directly to the wholesaler. He was so successful that demand overtook his own farm’s

supply. He began buying and shipping other farmers’ fruit as well. In 1900, Smith was faced with

a glut of fruit in successive seasons which had caused a price drop and excess fruit left unsold. E.D.

Smith decided to start making jams and jellies.

Up to 1903, all pure jams sold in Canada were imported from England. E.D. Smith’s was

the first pure jam ever produced commercially in Canada. Starting in the basement of the fruit

house, the first products were so great a success that in 1905 a factory was built and the company

went into full scale jam production.

In 1910, the company expanded production into tomato ketchup and puree. In the

depression of the 1930’s demand for fruit products declined. Tomato puree grew to become an

important product especially in export markets. One company with whom it had a contract, H.P.

Sauce Limited of Great Britain, responded by allowing E.D. Smith to sell its products in Canada. In

1942, the Second World War reduced commercial trans-Atlantic shipping to a trickle and H.P. sales

were severely reduced. H.P. licensed E.D. Smith to make its sauce in Canada using a secret formula

– a deal sealed with only a handshake. In 1948, H.P. acquired Lea and Perrin’s which, in turn,

allowed E.D. Smith to manufacture the famous Worcestershire Sauce.

In that same year, E.D. Smith died at the age of 95. Among his achievements was a ten year

term as Member of Parliament for Wentworth South and a seat in the Senate granted in 1913. He

fought for, and won, better transportation facilities for fruit on railways and steamships. He also

inspired improvements to mechanical loading and unloading of ships at dockside. He was a strong

advocate of women’s rights, in particular, a woman’s right to vote.

-------------------------

This case was written by Marvin Ryder. Case material is prepared as a basis for classroom

discussion only. Copyright 2020 by Marvin Ryder, Michael G. DeGroote School of Business,

McMaster University, Hamilton, Ontario. This case is not to be reproduced in whole or in part by

any means without the express written consent of the author.

2

Returning from active service in World War II, Armand Smith, E.D. Smith’s son, became

President of the company. The return of servicemen and the increased flow of immigrants to

Canada brought a renewed demand for processed food products. Plant operations had to be

expanded to process fruit pie fillings and a host of new tomato-based products. Armand Smith

remained as President until 1956 when E. Llewellyn G. Smith, grandson of the founder, succeeded

him.

From 1956 to 1981, the company went through a major expansion plan that enabled it to

compete with multi-national food corporations in the Canadian market. A company organization

based on the functional areas of business – marketing, sales, manufacturing, finance and data

processing – was adopted. Diet products, bulk pie fillings and, in 1969, Garden Cocktail vegetable

juice were all introduced. In 1968, E.D. Smith purchased Ware Foods Limited of Hamilton which

produced a broad line of institutional products for the growing food service industry. In 1976, the

company acquired McLarens Foods Limited of Hamilton whose olives, pickles and selected

specialty products had an excellent reputation within Canada.

In 1986, a fourth generation of Smith’s became President with the appointment of Llewellyn

S. Smith. E.D. Smith remained, over 135 years later, a wholly Canadian controlled and operated

company.

Company Operations

The company had kept pace with changing markets and new taste trends by means of a

modern, efficient manufacturing capability, progressive management, and a dedicated group of over

200 employees. With the exception of sales offices, the entire E.D. Smith company operated from

Winona, Ontario. The company continued to handle its own shipping. Products were carried by rail

to Atlantic and western Canada while in Ontario and Quebec, the E.D. Smith fleet of transport

trailers handled deliveries.

Grocery products accounted for a major proportion of the Food Division business. Not

mentioned previously, E.D. Smith sold chili sauce and relish under its own name. It continued to

sell H.P. Sauce and Lea & Perrins. Sales of these products were handled primarily by the 20 person

National Grocery Sales Force who worked in all provinces except the Atlantic where a broker was

retained. Although the company’s markets were mostly domestic, the firm had limited sales outside

North America.

In manufacturing, whenever possible, Canadian raw materials were purchased. Raspberries

from British Columbia, blueberries from the Maritimes, rhubarb in Quebec and apples and cherries

from Ontario were examples of Canadian sourcing. In fact, the company was working to establish a

Canadian source of strawberries that met its specifications better than Mexican or American fruit.

People were a key ingredient to E.D. Smith’s success. A team spirit was promoted and an

open door policy was maintained to ensure good labour relations. Employees were encouraged to

participate in “speak-up sessions” and in the company newsletter – The Homestead – offering a

forum for suggestions on maintaining and improving company standards. Employees were also

encouraged to participate in subsidized courses both on and off the premises.

3

Automation and innovation had streamlined the production process. Modern methods

preserved the products’ natural goodness and ensured quality standards while maintaining stable

prices. Computers assisted management in controlling operations from receipt of ingredients to

order assembly for customer deliveries. While the company was busiest in the fall, production

continued year-round with frozen and fresh fruit imported from the United States, British Columbia

and Europe. The seasonality and variety of products necessitated a complex scheduling system to

ensure maximum efficiency and cost control.

The Jam, Jelly, and Marmalade Market

Marketing research indicated that when consumers were asked what image the name E.D.

Smith conjured in their mind, the answer most often given was jam. After all, E.D. Smith was the

first company to sell “pure jam” in Canada. Any product called “pure jam” had to contain a

minimum of 45% fruit. The remainder of the product could contain sugar and natural preservatives

such as citric acid. No additives, no artificial colours and no chemicals could be added to “pure

jams.”

E.D. Smith sold 85% of its pure jams in Ontario. Sales in Quebec were negligible due

mostly to Quebecers liking of sweeter, less thick jams. Likewise sales in Canada’s west were nearly

negligible due to the high cost of shipping a heavy product sold for a low price. The Maritimes

accounted for the remainder of E.D. Smith’s jam sales. Due to the concentration of sales in Ontario,

Lee Ann decided to narrow the focus to this market.

In Ontario, the top six brands of jam, jelly and marmalade accounted for 53.7% of the sales.

(See Table 1 for a comparison of the top six companies) This was a highly fragmented market with

many companies vying for market share. Only two of the top six brands were made in Canada. The

products of many smaller companies were not classified as “pure” jams and either contained less

fruit or large quantities of pectin (a natural substance used to “solidify” a jam, jelly or marmalade).

Yet heavy competition was surprising since demand for both jam and jelly had not grown in the last

five years (annual changes in demand fluctuated between +1% and -1% for both dollar sales and

volume) and demand for marmalade was declining at a rate of 8% per year.

Theories to explain the competition were plentiful. Perhaps more and more people were not

eating breakfast, or at least not eating breakfast in the home, but breakfast cereal and microwaveable

breakfast sales were growing. Perhaps consumers had turned away from jam, jelly and marmalade

in favour of honey, peanut butter and other breakfast spreads. Dollar sales of peanut butter grew 3%

in the last year though the volume sold did not change. While fewer children were eating peanut

butter, consumption by people over 45 was growing. 70% of Canadians ate peanut butter weekly.

Lee Ann had noticed that a former market leader in the jam, jelly, and marmalade sector – Kraft –

had dramatically changed its strategy. It still made available a few flavours of jam (raspberry and

strawberry) in 500 ml. jars but its emphasis had shifted to its line of peanut butter even adding a

whipped and an “all natural” peanut butter line. Honey was a different matter with year over year

dollar sales growing by 9% due mostly to volume increases. While some people had a nut allergy,

no one was allergic to honey. Not all consumers ate honey at breakfast; some people used honey as

a natural sweetener in baking or in a cup of tea.

4

Table 1 Comparison of the Top Six Jam, Jelly and Marmalade Producers

Smucker’s St. Dalfour E.D. Smith Greaves Welch’s Bonne Maman

Market Share 15.7% 10.5% 9.3% 7.6% 5.3% 5.3%

Where Made? USA France Canada Canada USA France

Typical Retail

Selling Price

$3.49

(250 ml.)

$6.19

(225 ml.)

$3.99

(250 ml.)

$4.99

(250 ml.)

$4.49

(500 ml)

$5.49

(250 ml.)

Jam

Strawberry X X X X X

Raspberry X X X X X

Blackberry X

Apricot X X X

Cherry X X X X

Peach X X

Seedless Rasp X X

Seedless Straw X X

Black Currant X X

Blueberry X X X X

Other Jam

Flavours

Pineapple Four Fruit

Cran/

Blueberry

Fieldberry Threeberry

Straw/

Rhubarb

Straw/Rhubarb

Four Fruit

Caramel Spread

Jelly

Strawberry X

Apple X

Marmalade

Orange X X

Orange – No

Sugar X

Flavours

Available in

500 ml jars

Raspberry

Strawberry

Apricot

Grape Jelly

Orange

Marmalade

$4.49

Raspberry

Strawberry

Apricot

Fieldberry

$4.99

Grape

Jam &

Jelly

Certainly, people had not turned to making their own jam. The amount of homemade jam

produced in Canada had been on a steady decline for the past 40 years. One other theory was the

decline in consumption of toast at breakfast. In 2009, the average Canadian ate toast and jam 36

times per year. By 2019, that had declined to 29 times per year.

The top selling brand in Ontario was Smucker’s with 15.7% of the market. In fact, it was

the best selling brand in Canada. Typical consumers of Smucker’s products were children who used

the spread with peanut butter in a sandwich. Smucker’s was a large, diversified, processed food

company. It entered Canada in 1988 – shortly after the Canada/US Free Trade Agreement was

signed. With a large advertising budget, it was able to establish and maintain the brand name in the

consumer’s mind. Its position, as the only producer of jam, jelly and marmalade, was soldified by a

product relaunch in 2014. Smucker’s had changed the labelling (giving new emphasis to the fruit).

5

The number two brand was St. Dalfour with 10.5% of the market. It only sold “pure” jams

and marmalade. It entered the Canadian market in the early 2000’s making it the newest market

entrant. Typical consumers of St. Dalfour jams were “discriminating” shoppers. They were looking

for a better product with a better taste. Independent taste tests indicated St. Dalfour’s flavour was

better than Smucker’s and equal to E.D. Smith’s. Being made in France, gave the brand some

“snob” appeal which compensated for giving consumers 25 ml. less in jars.

E.D. Smith was third in the market with 9.3% of the market. Like St. Dalfour, typical E.D.

Smith consumers were looking for a better product with better flavour. In 2015, the company re-

positioned its diet line of jams as “no sugar added” and, by 2019, accounted for 33% of E.D.

Smith’s sales. These jams contained no sugar but were sweetened with Sorbitol – a natural

sweetener suitable for use in a low sugar diet. The “no sugar added” product line, including Apricot,

Fieldberry, Raspberry and Strawberry, had recently been reformulated using juice concentrates as

sweeteners. The only competition in the “no sugar added” line was Smucker’s. The two companies

split the market equally.

One-quarter of the jam packaged at E.D. Smith was private labeled – the packaging of E.D.

Smith product using another firm’s jars and labels. Typically, private labeling was done for a

grocery store which possessed a house brand (like President’s Choice, Selection, Irresistibles, Blue

Menu, Yellow label, etc.). In recent months, private label sponsors had requested a change in the

glass jars from the cylindrical shape used by E.D. Smith to a squarer shape. None of its competitors

had ever engaged in any private labeling.

The number four brand was Greaves with 7.6% of the market. This company made its jams

forty minutes down the Queen Elizabeth Way (QEW) highway in Niagara-on-the-lake. In some

ways, Greaves was a regional player serving the greater Toronto and Hamilton area along with

Niagara. It operated a boutique store in the historic town of Niagara-on-the-lake which was a

favourite stop for tourists. Expanding into grocery stores allowed those tourists to re-stock Greaves

jam without having to travel back to the town. Greaves was perceived as a brand to be savoured by

adults and not “wasted” on children.

Tied for fifth position was Welch’s and Bonne Maman at 5.3% of the market each. Welch’s

competed in a narrow market niche – grape jams and jellies. In fact, Welch’s was the number one

seller in that niche. The Welch’s family brand extended to grape juice and grape drinks in frozen

concentrate, glass jar and tetra-brick (cardboard box) forms. It only sold grape jam and jelly in 500

ml. jars. In that size category, it only saw competition from Smucker’s and E.D. Smith. Only

Smucker’s produced a grape flavour. Bonne Maman was also made in France. It entered the

market in the late 1990’s. The labeling and appearance of the jars seemed quite rustic – like it was

made by someone’s mother. Lee Ann wondered if the brand had adopted a more professional

approach whether it would sell more units.

The Situation at Hand

In 2014, E.D. Smith sold 250,000 cases of jam and jelly in Ontario – a $6.2 million

business. By 2019, that figure had declined to 163,000 cases – an annual sales decrease of 7%.

Without realizing it, E.D. Smith had been “milking a cash cow” for, at one time, E.D. Smith had

6

been the market leader. The steady decline had been halted only twice during the last twenty years

– the introduction of “no sugar added” jam in 2015 and a relaunch of the product in 2010. That

relaunch consisted of a change in label design (emphasizing the fruit) accompanied by a couponing

campaign in a newspaper/magazine insert. In recent years, the jam line was given no advertising

support as E.D. Smith had focused advertising dollars on other product opportunities.

During the recession of 2008, E.D. Smith undertook cost-cutting moves which saw the

amount of fruit used in the pure jam reduced to the minimum. Only a small quantity of fruit could

be supplied by the E.D. Smith farms so, with purchasing budgets cut back, the quality of the

imported fruit also suffered. A final cost-cutting measure saw the substitution of cheaper fructose

sugar for glucose sugar – a savings of thirty-six cents per case of twelve jars. A side effect of using

fructose in cooking the jam was a slight browning of the mixture. Glucose sugar not only improved

the colour of the mixture but improved the flavour as well.

The market was highly price sensitive and E.D. Smith was a price taker or follower. Its

strategy was simply to price 50 cents above Smucker’s. When Smucker’s changed its price to $3.49

for the 250 ml. container, E.D.Smith charged $3.99 at the retail store. Occasionally, to help move a

volume of product, one of the two firms would use a “sale” price 50 cents lower at the retail store.

However, it was not unusual to find the other brand moving its price once one took the lead. E.D.

Smith expected the regular price set by Smucker’s to increase soon as there had been no price

increase during the previous three years.

Lee Ann was concerned with rumours/suggestions from wholesalers and retailers that the

amount of shelf space devoted to jam, jelly and marmalade in retail stores was about to be reduced.

The argument made by the trade was that sales of these products had been declining and thus did

not deserve as much exposure as they currently had. This meant either that the number of varieties

carried by each store of each type of jam, jelly and marmalade would be reduced or some brand(s)

would have to be eliminated. Both Greaves and Bonne Maman appeared to be vulnerable.

The Possibilities for E.D. Smith

Lee Ann could take a defensive posture and eliminate some of the varieties of jam and jelly

produced by E.D. Smith. Two varieties (strawberry and raspberry) accounted for nearly 70% of

sales. These two could be kept in two sizes (250 ml. and 500 ml.). A different approach would be a

flanking maneouver which positioned the jam and jelly line as a product used in cooking/baking

rather than as a breakfast spread. Jam could be used in cakes as a filling, in jelly rolls, on ice cream,

over waffles, in tarts, in dessert treats, in Christmas baking, as a sauce ingredient, or in muffins.

Before Lee Ann joined E.D. Smith, the responsibility for two products from the jam line – Lemon

Spread and Mint Jelly – were internally transferred to other units. Many consumers viewed mint

jelly as a condiment – like ketchup or mustard – and served it exclusively with lamb dishes.

Similarly, many consumers viewed lemon spread as a tart or cake filling. Though these products

could be found in the jam, jelly, and marmalade section, they were not Lee Ann’s responsibility.

A different flanking manoeuver would be to focus on “peculiar” or unique flavours of

specialty jams and jellies. At a current average price of $27.00 per case, a new flavour had to

generate sales of at least 4,000 cases to break-even. Coupled with this could be a price increase to

7

establish a more premium image. Though sales volume would likely fall, the profit margin on each

jar would be greater and, presumably, profits could rise. A more offensive move would be to

relaunch or even reformulate the product. In a relaunch, a company could change the packaging,

the labeling or the promotion of the product in such a way that it had a fresh, new image.

Reformulation would mean a change in the basic product itself either through a new jam recipe, a

change in fruit or a change in sugar. If a relaunch or reformulation were undertaken, how similar or

dissimilar should the packaging, label, promotion or recipe be to the other products on the market?

Should the price be changed? Should E.D. Smith try to become the price leader?

Another offensive move would be to launch jams/jellies in the United States. Informally,

E.D. Smith liked to concentrate the firm’s efforts within an 80 mile radius of Winona. Shipping

costs increased price to a nearly non-competitive level outside of that area. Nonetheless, including

the United States, 160 million people lived within an 800 mile radius of Winona.

Thirty years ago, E.D. Smith stopped selling Orange and Three Fruit marmalade. Perhaps

the line could be revitalized. The ultimate offensive move would be the launch of a second E.D.

Smith jam and jelly line. E.D. Smith could have a regular and premium/old-fashioned line of jams

and jellies – E.D. Smith Classic? These two lines would have different price points, packages,

labels and recipes and would require separate promotional support to build awareness and

separation in the minds of the consumer.

The Decision

The costing of the many options would have to come later. For now, Lee Ann was

screening the alternatives from a strategic viewpoint. Equally of concern was the tactical plan that

would have to be developed for any chosen strategy. Lee Ann took off her jacket and slipped off

her shoes. There was plenty of work to be done.